Your View: Why can't Washington do anything?

Our country is in a mess! We have just gone through a "fiscal cliff" agreement but almost nothing has been done. They did agree to increase some taxes, but almost nothing was agreed to reduce spending. So they just postponed the real problem of reducing our deficits and debt for another two months, when we will be exceeding our debt limit of $16.4 trillion and facing disaster.

Comment

By RICHARD B. YOUNG

southcoasttoday.com

By RICHARD B. YOUNG

Posted Jan. 14, 2013 at 12:01 AM

By RICHARD B. YOUNG
Posted Jan. 14, 2013 at 12:01 AM

» Social News

Our country is in a mess! We have just gone through a "fiscal cliff" agreement but almost nothing has been done. They did agree to increase some taxes, but almost nothing was agreed to reduce spending. So they just postponed the real problem of reducing our deficits and debt for another two months, when we will be exceeding our debt limit of $16.4 trillion and facing disaster.

In fiscal year 2012 government spending was $3.5 trillion, 44 percent more than the $2.4 trillion it collected from all sources. The National Debt increased by 8.6 percent to over $16 trillion.

Why can't our senators and representatives do anything? Winston Churchill said that "Democracy is the worst form of government except all the others that have been tried." And Jean Claude Juncker, president of the Euro Group of Finance Ministers said: "We all know exactly what needs to be done, we just don't know how to be re-elected after we have done it."

So what are the major problems?

The first is Social Security, which has run gigantic surpluses for years, but with people living longer and the Baby Boomers retiring, it is now paying out more than it collects. Since the government has already spent all the money in the trust funds, the only assets are a piece of paper promising that we taxpayers will cover future deficits. Social Security amounted to 35 percent of all money collected by the government in 2012.

In the 1930s, during the Great Depression, President Franklin D. Roosevelt formed Social Security. He said that it was designed to prevent those who had not, or could not, prepare themselves for old age from ending up in poverty.

We all agree that helping poorer people to stay out of poverty is desirable (even though there are incentives to retire early and take advantage of the system.) But we are taxing all working people to give charity to all older people whether they need help or not.

A possible solution would be means-testing for those benefits to save the system. If an older person has less than $25,000 of other income beside Social Security, he should get all Social Security benefits. The guy with over $100,000 of other income should get no benefits (even though he had to be taxed to the welfare scheme while he worked). Those in between $25,000 and $100,000 would have benefits reduced proportionally.

The second problem is Medicare and Medicaid, which amounted to 35 percent of all money collected by the government in 2012, and has the same problems as Social Security with people getting older. But, medical costs are increasing very rapidly. Obamacare will make it much worse. The system must be redesigned so costs are reduced by hitting the health care providers, and/or reducing benefits covered. The alternative would be to have the programs means-tested like Social Security.

The third serious problem is interest on the national debt, which was 15 percent of all money collected. This cannot be corrected because the debt is increasing so rapidly, and rate of interest is at an all time low. (The Federal Reserve is doing this to keep the cost of interest on the debt below normal and make the deficit less.)

One possible solution would be to take the amount that was put in to the trust funds for the interest paid to them as well as the government's contribution to their employees retirement should be invested in the public market. Currently they just print more money to sell special non-negotiable bonds to the trusts. The trusts end up with a piece of paper that guarantees we taxpayers will give them more money when needed — there is nothing there. If a business tried that trick they would be in jail. By investing in the public market, the trusts would have real assets to pay for their upcoming needs, the total debt would be reduced, and a real stimulus to the economy would mean better times.

The fourth big problem is defense, which amounts to 27 percent of all government money collected. Unfortunately people and nations will have to learn to get along with each other to stop all our foreign wars so we can reduce our foreign commitments.

The above four items amount to 10 percent more than all money collected by the government. You could just shut down all the rest of government and you still have a 10 percent deficit.

Let us all hope that the president, the House and Senate can finally work together not only to avoid the coming second fiscal cliff but also to get spending under control. We need that badly.

Someone once said "The government cannot give anything to anybody that the government does not first take from somebody else."